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Chatham Lodging Trust (NYSE:CLDT)

Q4 2013 Earnings Conference Call

February 19, 2014, 2013 11:00 AM ET

Executives

Chris Daly – President, Daly Gray, Inc.

Jeffrey H. Fisher – Chairman, President and Chief Executive Officer

Dennis M. Craven – Executive Vice President and Chief Financial Officer

Analysts

Patrick Scholes – SunTrust Robinson Humphrey

Gaurav Mehta – Cantor Fitzgerald

Nikhil Bhalla – FBR Capital Markets

Operator

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Chatham Lodging Trust Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today February 19, 2014. I will now turn the conference over to Mr. Chris Daly President, Daly Gray Inc. Please go ahead.

Chris Daly

Thank you, Sara. Good morning everyone and welcome to the Chatham Lodging Trust fourth quarter and full year 2013 results conference call. Yesterday, after the close of the market, Chatham released results for the fourth quarter ended December 31, 2013, and I hope you’ve all had a chance to review the press release. If you did not receive a copy of the release or you would like a copy, please feel free to call my office at 703-435-6293 and we’ll be happy to email you a copy. Or you can also take a look at the release at Chatham’s website, www.chathamlodgingtrust.com.

Today’s conference call is being transmitted live via telephone and by webcast over Chatham’s website and at streetevents.com. A recording of the call will be available by telephone until midnight on Wednesday, February 26, 2014 by dialing 1-800-406-7325 reference number 4646993. A replay of the conference call will be posted on Chatham’s website.

As a reminder this conference call is the property of Chatham Lodging Trust, and any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Chatham is prohibited.

Before we begin, management has asked me to remind you that in keeping with the SEC’s Safe Harbor guidelines, today’s conference call may contain certain forward-looking statements about Chatham Lodging Trust, including statements regarding future operating results and the timing and composition of revenues among others. Except for historical information, these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, including the volatility of the national economy, economic conditions generally, and the hotel and real estate markets specifically, international and geo-political difficulties or health concerns, governmental actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, supply and demand for lodging facilities in our current and proposed market areas and the Company’s ability to manage integration and growth. Additional risks are discussed in the Company’s filings with the Securities and Exchange Commission.

All information in this call is as of February 17, 2014 unless otherwise noted, and the Company undertakes no obligation to update any forward-looking statements to conform the statements to actual results or changes in the Company’s expectations.

During this call, we may refer to certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, which we believe to be common in the industry, and helpful indicators of our performance. In keeping with the SEC regulations we have provided and encourage you to refer to the reconciliations of these measures to GAAP results in our earnings release.

Now to provide you with some insight into Chatham’s 2014 – excuse me – 2013 fourth quarter and full year results, allow me to introduce Jeff Fisher, Chairman, President and CEO; and Dennis Craven, Executive VP and Chief Financial Officer.

Let me turn the session over to Jeff. Jeff?

Jeffrey Fisher

Thanks, Chris good morning everybody. Dennis and I are happy to be here again to talk with you this morning about 2013 and also give you a little guidance on 2014. 2013 was another great year for Chatham.

I think our momentum continued to build very strongly and as we look at the metrics that the company is reporting here for 2013 and in particular, I am very pleased at the acquisitions that we made in 2013.

Clearly demonstrating our ability to selectively target certain hotels within certain very specific markets, our target markets with high barriers to entry and growing demand generators, sometime leisure, sometimes medical, all the time corporate, really, really shows.

I think when you look at RevPAR results particularly RevPAR results and EBITDA growth for the hotels that we’ve acquired. So, we really believe again in 2014 I don’t see any reason why that momentum should not continue to build this year because fundamentally there is some difference in the supply demand equation.

Of course, assuming the GDP growth, say it’s anywhere around where it was in 2013 and I know that we’ve got a pretty healthy pipeline of hotels and deals that we are working on. So from that perspective I think again great internal growth and some possibilities for some substantial external growth for the company as well.

Speaking to great deals, we were able to make a couple in the fourth quarter as we expanded our portfolio in the off-market acquisition of two very high quality hotels comprising almost 400 rooms for approximately $112 million.

The beautiful 231 room, Residence Inn in downtown Bellevue, Washington, a very strong and fast-growing market and a 160-room SpringHill Suites in the historic Savannah Georgia Downtown/Historic District.

Both really exemplify again our focus in buying when possible and in those downtown markets that are not necessarily New York City or Washington D.C. where some of our other brothering claims that’s the only place to make deals.

We see value and a lot of value in markets like Bellevue or certainly even in the Historic District and Savannah where it’s hard to build hotels or built with structured parking and garages underneath and the all the good stuff that you want to see in a growing market. Like that with very high land costs.

These last two acquisitions capped off a round of incredible portfolio acquisitions and additions that I said since late 2012 acquiring seven hotels comprising 1179 rooms for approximately $260 million. We’ve grown our rooms owned approximately 50% from 2412 rooms to 3591 rooms.

We continue to target top market transactions in our targeted markets that provide enhanced RevPAR growth above both national averages and our current owned portfolio. We have one of the highest – I believe quality select service and upscale extended-stay investment portfolio in the REIT space and we will continue to acquire our assets to meet our very strict acquisition criteria which will increase our current earnings stream, cash flow, and ultimately dividends.

Looking at our portfolio to slightly some year-over-year comparison due to the super storm Sandy in the 2012 fourth quarter, RevPAR grew 4.4% for the entire portfolio to $103.

Sandy business aided our fourth quarter 2012 portfolio RevPAR growth by approximately 200 basis points. So accounting for that sub-comp our portfolio RevPAR growth would have been approximately 6.5% well above industry averages.

Our 2013 acquisitions have produced phenomenal results with RevPAR up over 8% in the fourth quarter and 10% double-digit RevPAR growth for those assets.

During the quarter, one-third of our portfolio saw RevPAR growth over 10%, strong growth markets for Houston, Boston, Billerica, Nashville, Brentwood, Minneapolis, Bloomington, Portland, Maine, San Antonio Savannah, our markets remain at solid footing with fourth quarter RevPAR growth of approximately 4% for the quarter and approximately 6% for the year.

This portfolio is showing really consistent strong RevPAR growth and we’ve been able to make some great acquisitions for this year in markets that not only command high absolute RevPAR, but it limits strong growth characteristics.

The converted DC Residence Inn is gaining traction in brand driven reservations as well as our own direct sales efforts, but I have to point out like everybody else that the DC area and surrounding areas is a top place to be RevPAR still is currently trending down as much as 3% to 5% as compared to the prior year.

Yet our hotel as I said is gaining first what you want to see is occupancy index in terms of its STAR and Smith reports, because first we put the date of business in the hotels, develop our upscale as standard stay business and that of course will be attracted by us in our direct sales effort and the Residence Inn brand.

In February, our occupancy index was 138.4 which is very strong, getting close to the point now where we can start pushing on REITs start moving the ADR index up and therefore the RevPAR index.

The RevPAR index for this year, just to kind of give you a little idea for DC downtown that conversion is budgeted to be around 120, looks like we will track close to that number.

And as a comparison on the hotel for the full year was a Double Tree guest suites, its RevPAR index was a 106%, that’s with the same competitive set. So, again, our return on investment, particularly on our incremental dollars here and I think as we move through the years, the next year, we are going to see some – on a relative basis very strong numbers coming out of this hotel.

But, when you look at our Tysons Corner Residents Inn which has traditionally always been a very, very strong asset, again, without some of the per diem government business that was in that area, very highly rated government per diem business that went away and that per diem is about $184 for downtown than we’ve got still pay thing an uphill battle as we try to gain RevPAR in those markets.

But, as we start lapping over, of course it’s not great consolation, but it’s some as we start lapping over last year’s numbers, of course on a comp basis and with dealing with the sequester impacts is going to get better as we move through the year.

Look at the supply and demand equation out there with the exception of downtown Portland Maine, where we knew at the outset and at the purchase and that’s why we were able to make such a great going in cap rate deal there.

There is some new supply coming downtown Portland into the Waterfront District but the market is very, very healthy. Little new supply, other than that, it’s really affecting our portfolio in 2014.

So we think the portfolio is well positioned for healthy RevPAR gains this year. We expect most of the RevPAR growth in 2014 and 2015 of course to be driven by growth in rates and we all know that our operating model is very efficient in driving and our operating team is very efficient in driving that incremental revenue to the bottom-line.

I think, some of our margin gains I would like to emphasize here as compared to the peer group and I am looking and reading different all the earnings releases that have come up today and looking at other folks’ numbers, I am pretty pleased to see that our fourth quarter operating margins expanded pretty significantly, up 170 basis points to 43.6%.

The increase is attributable not only to the acquired hotels where margins increased 220 basis points to 44.5%, again a testament to hospitality and their ability to immediately going at.

I am talking within the first quarter after acquiring an asset and make changes and really grow margins in hotels that we acquire. But also, aside from acquired hotels, the portfolio owned for greater than one year has strong margin growth in that, those markets were up 100 basis points to 43.4% and our flow through in those assets was roughly 80% and the operating leverage in those assets as we like to measure it is 2.1 times.

So, again I had to commend any of our operating folks that are listening to this call and frankly I think our shareholders are to be pretty pleased with that kind of flow through. It just shows our commitment and our ability, not only to underwrite deals and understand and identify immediately where the opportunities are and if there aren’t and the opportunities whether it’s margin or top-line, most likely we will make the acquisition.

So with that, in identifying those opportunities and that executing on those opportunities, that’s what you want to look for and then therefore you got to look at these metrics that I am talking about in order to tell the story.

We think, we got an unique hotel platform here at Chatham owning pretty branded extended stay and select service hotels and employing our managers is we think drives enhanced returns and we think that’s unique benefit that approves to the shareholders of Chatham.

And our emphasis, since our IPO, we’ve increased our hotel EBITDA margins by approximately 31% in 2010 to now 38%, a pretty strong improvement of 700 basis points in the span of just three years.

With strong top-line revenue growth and continued margin expansion combined with the significant reduction in borrowing costs, we’ve been able to significantly expand FFO up 150% to $7.6 million and FFO per share rising 40% to 29%, which came in at the upper-end of our guidance range.

Since our IPO and including our 2014 guidance FFO per share has grown approximately 25% which is quite strong and with capacity in our balance sheet to make additional acquisitions through more leverage, the potential earnings growth above our guidance range is meaningful.

Before turning it over to Dennis, I’d like to touch on a few items of particular interest of where I am going, the Innkeepers portfolio sales of BlueMountain unsolicited offer and the proposed slate of three directors posed by HG Vora, most already know that along with servers we decided to market the 51-hotel Innkeepers portfolio probably this year the marketing process really has just begun.

At this point, confidentiality agreements are being executed, call for offers or date for sale out there and just as a reminder, we acquired that portfolio with Cerberus for just over $1 billion in late 2011 on bankruptcy has shown improvement thirteen hotels from the original portfolio.

The portfolio is in very good shape and the deferred maintenance for the bankruptcy date have been addressed in the portfolio has performed exceptionally well. Since then, as evidenced by the distributions that have been made to the partners, so we expect the interest in the portfolio should be pretty high and Chatham’s shareholders to have the benefit handsomely if there is a transaction from the monetization of our promote that we retained in that deal.

And on December 4 we received an unsolicited conditional proposal from BlueMountain Capital to acquire the company for $21.50 per share; ultimately our Board of Trustees evaluated the proposal and publicly rejected the offer on December 12, 2013.

HG Vora proposed a slate of three directors to run the nomination to the Board of Trustees at our next Annual Meeting. HG Vora has not withdrawn its slate at this time. With that, I will turn it over to Dennis. Dennis?

Dennis Craven

Thanks, Jeff. Good morning. For the fourth quarter, we reported we reported net loss of $0.1 million or $0.01 per diluted share compared to net loss of $2.4 million or $0.17 per diluted share in the 2012 fourth quarter.

Acquisitions, reduced interest expense and margin growth contributed to the overall improvement year-over-year. Third quarter RevPAR is at 4.4% to $103 for the 25 hotels we own for the entire quarter, compared to our prior earnings target of plus 2% to 3%.

The general outperformance was really across our entire portfolio that led to the beat on the RevPAR side and as Jeff alluded to the DC hotel was beginning to ramp a little bit more significantly as we move through the quarter.

The RevPAR gain was attributable to about a 50-50 split in both occupancy and ADR gains with occupancy up 77% and ADR up to $139. The percentage point of RevPAR growth translates to approximately $0.2 million of revenues, so it’s a slightly significant beat on the RevPAR side, it doesn’t meaningfully impact FFO for the quarter.

Super storm Sandy impacted our portfolio RevPAR growth by approximately 200 basis points in the quarter as our hotels, New Rochelle, New York, White Plains New York and most significantly Holtsville, New York on Long Island gained business in the fourth quarter. The Holtsville hotel alone, the impact from that hotel impacted RevPAR by about 150 basis points in the quarter.

In the 2013 fourth quarter RevPAR for Holtsville Residence Inn was down about 12% all attributable to Sandy gains in the fourth quarter of 2012. Our hotels mostly extended stay and select service hotels run high occupancies due to the relocations, their markets that command high rates and occupancy.

And the fact that basically the upscale standard stay segment, we believe is the segment of choice for many travelers. Even if the occupancy levels that we operated in 2013, we still see room for occupancy growth in 2014.

The key line there and it’s the fact that occupancy in our market has climbed to almost 25% and given that our hotels had a significant market share premium of 120 that index in 120, we should be able to drive rates higher while maintaining or raising our occupancy levels.

With respect to the Innkeepers joint venture, RevPAR grew 2.7% for the quarter to $90 on an increase in ADR of 4.5% to $132 and a decline in occupancy to 72% as occupancy is impacted by renovations in some of our Seattle hotels. The full year RevPAR grew 5.6% to $99.

Adjusted EBITDA for the company rose 52% to $12.7 for the quarter. In the quarter, the joint ventures between both the Innkeepers joint venture and our Torrance joint venture contributed approximately $2.2 million of adjusted EBITDA to our results, compared to approximately $2.0 million in the 2012 fourth quarter.

The Savannah acquisition which is not included in our original guidance contributed $0.1 million of EBITDA in the quarter. We closed that hotel in the first week of December and for us this was entirely offset by interest short as $0.1 million attributable to the $40 million for one of our revolving credit facility to close the acquisition in early December.

Adjusted FFO jumped almost 160% to $7.6 million, up $4.7 million from the 2012 fourth quarter, and on a per share basis, FFO per share rose almost 40% to $0.29 compared to $0.21 in 2012. The joint venture contributed approximately $0.03 of FFO per share to the consolidated results, basically flat to the 2012 fourth quarter.

Net debt was approximately $268 million at the end of the quarter, comprised a debt of $272 million offset by approximately $4 million of available cash. At September 30, net debt was $105 million, lower at $163 million.

In the fourth quarter, we basically used debt and available cash on our balance sheet to acquire the Residence Inn Seattle Bellevue Downtown for $72 million and the SpringHill Suites Savannah for $40 million.

At December 31, our leverage calculated as net debt divided by our hotel investments at cost was 36% and our debt-to-EBITDA of 5.7 times was in line with the average for all lodging REITs.

Our 2014 debt ratio is at very healthy with the debt service coverage ratio of approximately 3.3 times after corporate G&A and after an FF&E reserve, our net debt to hotel EBITDA of approximately 4.6 times on a standalone basis and 5.4 times including our share of the joint ventures debt to EBITDA, very healthy ratios moving forward in 2014.

As we have emphasized many times, we are comfortable operating at levels a little higher than our long-term stated goals of 35% given our confidence in the lodging industry and the fact that borrowing ratio is historically very attractive even today.

During the fourth quarter, we upsized our revolving line of credit from a maximum capacity of $115 million to $225 million while maintaining our very attractive credit spreads.

Our own borrowing costs were approximately 4.5% at December 31 and the weighted average rate on our fixed rate debt was just under 5% to 4.99%. We will continue to use our balance sheet to fund our growth as opportunities arise

During the fourth quarter, we closed an approximately $48 million loan on the downtown Bellevue Residence at a rate of 4.97% culminating again with the issued about $165 million of ten-year debt at an average rate of 4.7%.

We believe we can make at least another $200 million of acquisitions and still be comfortable using our balance sheet to take advantage of those opportunities as they arise and looking at fixed rate loans, when we look at fixed rate loans and be able to lock in rates on a ten year basis.

It certainly provides a stable flow of cash that allows us to either pay down debt, invest in additional assets or return cash to our shareholders via incremental dividends.

Spending a few minutes on guidance for the year, for 2014, obviously the hospitality industry has forecasted to continue to improve based on modest GDP growth of approximately 3%, supply growth remaining fairly moderate.

We want 22% and obviously resulting in a net increase in margin demand. Starwood and Marriott are forecasting RevPAR growth in a range of 4% to 7%, Smith Travel PwC and PKF are all projecting RevPAR growth 5.3%, 6.6% and 6% respectively in 2014.

Smith Travel and PKF have also put out 2015 RevPAR guidance of 4.7% and 7.5% respectively. Our guidance assumes the renovation of the Residence Inn White Plains New York in the first quarter and the Hilton Garden Inn in the second quarter and that we do not sell the Innkeepers joint venture.

On a full year basis, the two joint ventures have been the Innkeepers joint venture and the joint venture with Cerberus where own the single Residence Inn in Torrance, California, are expected to contribute approximately $10.6 million of EBITDA and $4.9 million of FFO or $0.18 per share in 2014.

We are projecting RevPAR growth of 5% to 6% in 2014 to a range of $114 to $115 with ADR growth expected to comprise approximately 90% of that increase. The rebranding of the

Residence Inn in Downtown DC is aiding our entire 25 hotel portfolio by little over a 100 basis points on a full year basis. Our acquisitions continue to fuel our RevPAR growth with most of the acquisitions expected to see RevPAR growth anywhere from 7% to 10%.

Stock markets for Chatham in 2014 really are isolated to the isolated to the Holtsville Hotel, which is again, has a tough comp due to super storm Sandy as well as the well as the Portland, Maine hotel, which we knew we were going to have a challenging 2014 due to the new supply which is also expected to see RevPAR decline in 2014.

On a comparable same-store basis 2013 hotel quarter-by-quarter RevPAR was $97 in the first quarter, $115 in the second quarter, $121 in the third quarter and $103 in the fourth quarter.

Total revenue is expected in the range of $159 million to $161 million, up approximately 28% over 2013. Other revenue is approximately 6% of total revenue for our portfolio, a little bit up as compared to our original 2013 portfolio due to the acquisitions significantly the Hilton Garden Inn and the Courtyard which as a higher F&B component to the revenue mix.

With increased rates comprising 90% of our room revenue growth our operating platform and quality of assets enables us to drive margins higher. Accordingly, we project hotel EBITDA margins to rise 200 to 270 basis points to a range of 39.8% to 40.5% up from 37.8% in 2013.

On a same-store basis, margins are expected to rise approximately 120 basis points on a flow of approximately 65% to 70% and operating leverage of 1.6 times. And if we look back at the last cycle, our hotel EBITDA margins were in the mid-40s and that was with the portfolio that had a lower absolute RevPAR level as compared to our existing portfolio. So when you look at the Chatham 25-hotel portfolio, it should ultimately operate at higher margins. So we have plenty of room to grow there.

From a corporate perspective, we anticipate corporate cash, administrative expenses to be approximately $6.4 million, up slightly from $6.1 million in 2013.

Corporate non-cash administrative expenses which represents share-based amortization for the board and for the executives of Chatham is expected to be $2.4 million up from $2.1 million in 2013 with the increase attributable to the incentive compensation awards granted to employees in January of this year.

Interest expense is projected to be approximately $12.8 million in 2014 up from $10.5 million in 2013. Our average volumes are up approximately $50 million over 2013, as we issued new debt to fund a portion of the $260 million of acquisitions in 2013.

We are forecasting LIBOR to grow approximately 30 basis points over the course of 2014 and our projections do not include any other changes to our capital stack or equity offerings throughout the year.

We forecast non-cash amortization of deferred financing fees to be $1.4 million, up from $1.2 million in 2013 due primarily to the new loans and the franchise fees that we paid on acquisitions. Income taxes are minimal for us that are projected to be $0.2 million, up from $0.1 million in 2013.

Capital expenditures for Chatham are expected to be $15 million in 2014, up slightly from $15.3 million spent in 2013 with the – as a break account; the CapEx comprises $6.3 million related to the two renovations, about $1 million in what I would term non-disruptive tip spending on acquisitions that we made. $3.5 million to replace the parking garage at our San Antonio, Texas, Homewood Suites.

About $1.5 million for the replacing of roofs and mechanical items outside of the buildings in our portfolio. $0.8 million for mattress replacements and $0.8 for the replacing of corridor carpet at the six Homewood Suites Hotels. The balance of the CapEx really just pertains to miscellaneous and emergency type items.

From a dispositions perspective we don’t expect any from the Chatham owned portfolio in 2014. When we rolled out our key operating metrics for us are expected to grow significantly in 2014.

Adjusted EBITDA is projected up 33% from $51 million to $68.5 million using the midpoint of our range, when we except the quarterly contribution of EBITDA to be approximately 19% in the first quarter, 29% in the second quarter 31% in the third quarter and 21% in the fourth quarter.

Adjusted FFO is expected to rise approximately 45%, to $45.8 million at the midpoint of our range from $31.7 million in 2013. The quarterly contribution of FFO per share is expected to be approximately 16% in the first quarter, 31% in the second quarter, 34% in the third quarter and 19% in the fourth quarter.

Resultantly, adjusted FFO per share is expected to jump 16% to $1.73 at the mid-point from $1.49 in 2013. We've stated since our IPO that we would continue to grow our dividends in tandem with our earnings.

As a percentage of FFO per share, we paid out approximately 60% in 2012 and 56% in 2013. Our confidence in the overall health of the hotel industry remains very positive and our Board of Trustees will reevaluate the 2014 dividend for the second quarter.

We know the dividends make up the primary component of REIT returns over time and our goal is to continue to build a successful company that produces strong cash flow that will provide such dividends to our shareholders.

Just touching briefly on the first quarter, RevPAR growth is projected to be 3% to 4%, during most of the quarter we’ll be completing 18 year renovation at the White Plains Hotel and its RevPAR is projected down 31% in the first quarter and additionally our Holtsville Hotel will still be going up against the tough comparisons and it’s projected to be down approximately 23% in the quarter.

Excluding both of those hotels, RevPAR growth would have been 6% to 7% and FFO per share would have been $0.01 to $0.02 higher. Through February 14, 2014, RevPAR for the 25 hotels is up approximately 7% for the basically the first 45 days of the quarter. And from a margin perspective, we are expecting margins to increase 50 to 100 basis points in the quarter.

Operator, at this time that concludes our remarks. So we'll open it up for questions.

Jeffrey Fisher

Anybody there, Sara? Chris, you there? Sara, are you there?

Question-and-Answer Session

Operator

My apologies. Ladies and gentlemen, we will now conduct the question and answer session. (Operator Instructions) Your first question comes from the line of Patrick Scholes of SunTrust. Please go ahead.

Patrick Scholes – SunTrust Robinson Humphrey

Hi, good morning gentlemen.

Jeffrey Fisher

Hey, Pat.

Patrick Scholes – SunTrust Robinson Humphrey

A couple questions here for you. You noted your target leverage ratio was at the yearend 36%. I am sorry, not target, your actually leverage ratio was 36%. Where do you see your – that your target at for that leverage ratio?

Jeffrey Fisher

I’ll let Dennis to take wag on that.

Dennis Craven

That was impacted, I think, for the time being, given where we believe we can buy assets and where we can finance some. I think we can certainly see ourselves moving that from 36% to where we were before when we get the Innkeepers deals which was kind of in the low 50% range, we were very comfortable at that level.

And if you look at where we would be on kind of a pro forma basis, it does touch the levels and we still provide very sufficient coverages in overall value – loan-to-value ratios at that type of level. So, it allows us to – and we believe do some more acquisitions.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, makes sense. And then a couple questions on the joint venture that is for sale. First, you are the minority partner; let’s say an attractive offer came in to the majority partner, what legal rights do you have there? Or would you be allowed to refuse it or what sort of say do you have in that?

Jeffrey Fisher

I think we ought to get, on a call or anytime too far into the legal document or whatever, other than to say that, that we are far here in the deal and that deal is considered together as the overall decision-making process goes, offer, sales, refinance, any of these kind of decisions that we’ve made in the past.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, just as I asked because I actually tried to research those documents, I couldn’t find anything. I don’t know if you can point me to what date that would have come out as an SEC release?

Jeffrey Fisher

Well, the JV agreement itself was filed with the 10-K 20/11 10-K.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, okay, I can go from there. Then, hypothetically, what would the ballpark proceeds be for – be to you if Innkeepers was monetized and what hypothetically would you do with the proceeds?

Jeffrey Fisher

You got to pick a price.

Patrick Scholes – SunTrust Robinson Humphrey

Right, okay let’s say $1.3 billion.

Jeffrey Fisher

Well, I think, which – I’ll turn it to Dennis take that all together it is around $80 million or $85 million. Is that right, Dennis?

Dennis Craven

Yes, yes, that correct. It’s around, $80 million, if $1.3 billion, includes both our promo and our capital.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, and then lastly, is it fair to think that you are active – or you would be potentially an interested buyer in this in purchasing the JV, either going back into it as a JV partner or possibilities for ownership?

Jeffrey Fisher

Well, you could – yes, you could do that two different ways. You could roll your promote, you could substantially obviously pick up your ownership interest in the staying with the JV partner, you could try to do it in other ways.

We think that, there is still legs left in the cycle and we still think that these assets exemplify in almost all respects other than perhaps age, exactly what we’ve been buying in Chatham. So, yes, I mean, we certainly are going to look at it and see how we can maximize for our shareholders.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, so, all options and possibilities are on the table in that regard it sounds like?

Jeffrey Fisher

I think we need to.

Patrick Scholes – SunTrust Robinson Humphrey

Okay, fair enough. I appreciate the color. Thanks.

Jeffrey Fisher

Thanks.

Operator

Your next question comes from the line of Gaurav Mehta of Cantor Fitzgerald. Please go ahead.

Gaurav Mehta – Cantor Fitzgerald

Thank you. Good morning. Couple of questions on your acquisition pipeline. So, as you look into 2014 and compare back to 2013, can you comment on the volume that you have seen in the market and also on the pricing levels that you have seen?

Jeffrey Fisher

I think the pricing levels really have not changed from 2013, probably at the outset of the year, there was a little bit less on the one-off basis, which is really what we have been specializing in cherry picking assets, talking to individual owners, but I would expect that will pick up a little bit as the year progresses. Of course, there is a lot large portfolios, select service portfolios on the market, starting the year which should not in this in 2013.

Gaurav Mehta – Cantor Fitzgerald

Thank you and one question on your 2014 guidance. I'm sorry – I missed this, if I missed this, but did you talk about how much of RevPAR growth will be excluding the hotels in the renovations?

Jeffrey Fisher

I think that’s put in a bracket, right Dennis?

Dennis Craven

Yes, on a full year basis, the RevPAR excluding is going to up about a 100 basis points for the first quarter alone, that was a few 100 basis points for the White Plains Hotel and for Holtsville. If you are talking purely just renovations for the White Plains Hotel and the Hilton Garden Hotel, it’s about a 100 basis points for the full year.

Gaurav Mehta – Cantor Fitzgerald

Okay, great. That's all I had.

Dennis Craven

Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Nikhil of FBR. Please go ahead.

Nikhil Bhalla – FBR Capital Markets

Yes, hi, good morning guys. Good morning. Just a question on the timeline for the asset sales, any color you can provide us Jeff, in terms of how long the process might take, will it extend to the end of the year? Do you think it could be a little bit sooner?

Jeffrey Fisher

I don’t think it will be end of the year, I think everybody would be burnt out by that. I would think that there is some typical normal call for offers in 30, 45 days later another call for offers final, but all really had to start as I mentioned, but, I would say some time around mid-way through the year, somewhere it’s going to know who is going to own this or not.

Nikhil Bhalla – FBR Capital Markets

Got it and typically the due diligence period after a contract signed is how long? Is it two to three months?

Jeffrey Fisher

It varies, it could be anywhere from 30, 60 or 90 days in a portfolio of this size.

Nikhil Bhalla – FBR Capital Markets

Got it. That's all for me. Thank you.

Jeffrey Fisher

Thanks, Nikhil.

Operator

There are no further questions at this time.

Jeffrey Fisher

Well, thank you all for listening. We appreciate the continued support and interest. We look forward as I mentioned to another strong year and hopefully some further strong appreciation in our share price.

We still think we are undervalued. We think the monetization of this promote interest should it occur, it will be a strong, strong gainer for us together with the internal growth in our assets and possible other external growth primarily funded by debt.

We think that, what we are hearing and seeing are still very, very low interest rates as compared to on a historic basis as Dennis mentioned. So, again, we look forward to talking to everybody after this first quarter. Thank you very much.

Operator

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.

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